New Luxembourg exit tax rules

The EU Anti-Tax Avoidance Directive of 29 May 2017 , as well as the exit tax provisions of the EU Anti-Tax Avoidance Directive of 12 July 2016 (ATAD 1) became effective in Luxembourg as from fiscal years starting on or after 1 January 2020.

The Luxembourg legislation implementing the ATAD 1 into domestic law was published on 21 December 2018 and generally became effective for fiscal years starting on or after 1 January 2019. The provisions covering exit taxation apply to fiscal years starting on or after 1 January 2020.

Overview of new exit tax provisions

Luxembourg's exit tax rules are amended to bring them in line with the ATAD 1 provisions. The rules specifically cover the transfer of assets, the transfer of a taxpayer’s tax residence and the transfer of activities of a permanent establishment (PE) into and out of Luxembourg.

Where assets are transferred into Luxembourg, the value of the assets as determined by the exit state must be used for Luxembourg tax purposes, unless that value does not reflect the fair market value (going concern value) of the assets. The acquisition date of the assets is their historical acquisition date as opposed to their transfer date. This rule applies to transfers of assets from any jurisdiction (even from a non-EU member state) into Luxembourg.

If an enterprise, a PE or individual assets are transferred from Luxembourg to another jurisdiction, taxpayers are subject to exit tax in an amount equal to the going concern value of the transferred assets at the date of the transfer less their tax value.

In addition, for fiscal years starting on or after 1 January 2020, taxpayers no longer can benefit from an indefinite deferral of payment of their exit tax liability. Instead, where applicable, the exit tax due must be paid in installments over a five-year period (without interest) in the case of a transfer to an EU or European Economic Area country with which Luxembourg or the EU has concluded a mutual assistance agreement for the recovery of tax claims. For transfers to any other jurisdiction, deferrals are no longer permitted.

Modified provisions : see details 


Luxembourg chose not to impute interest on installment payments and not to require that the taxpayer provide a guarantee, although ATAD 1 offers such options for EU member states. In addition, exit tax payment deferrals granted under the old regime for financial years that closed before 1 January 2020 are not impacted by the new provisions.



Source:Deloitte | Luxembourg Tax Alert |




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